International Monthly: July 2015

 U.S. Competition, Consumer Protection and Privacy News

JULY 2015


FTC Challenges Merger of Steris Corporation and Synergy Health

The FTC issued an administrative complaint charging that Steris Corporation’s proposed $1.9 billion acquisition of Synergy Health plc would significantly reduce future competition in regional markets for sterilization of products using radiation, particularly gamma or x-ray radiation. Only Steris and Sterigenics provide contract gamma sterilization services in the United States, according to the complaint. At the time the proposed merger was announced, Synergy was implementing a strategy to open new plants that would provide contract x-ray sterilization services. These services – which currently are not available in the United States – would provide a competitive alternative to gamma radiation, according to the complaint. The FTC’s complaint charges that it is unlikely that new competitors would replicate the competition that would be eliminated by the merger. The Commission also authorized staff to seek a temporary restraining order and preliminary injunction in federal court.

Sysco and US Foods Abandon Proposed Merger after Court Grants FTC’s Preliminary Injunction Motion

In February, the FTC filed an administrative complaint charging that the proposed merger of Sysco and US Foods would violate the antitrust laws by significantly reducing competition for broadline foodservice distribution services. According to the complaint, this reduced competition nationwide and in 32 local markets would lead to higher prices and diminished service for customers, including restaurants, hospitals, hotels, and schools. The U.S. District Court granted the FTC’s request for a preliminary injunction to prevent the parties from consummating the merger, and to maintain the status quo pending an administrative trial on the merits. Following the parties’ abandonment of the transaction, FTC Bureau of Competition Director Debbie Feinstein issued a statement lauding it as a “victory for both competition and consumers. The evidence shows that Sysco and US Foods were strong rivals in broadline food distribution whose combination would have harmed consumers.”

Court Rules in Favor of FTC on Pharmaceutical Industry Patent Rights Reportable under HSR Act

The U.S. Court of Appeals for the District of Columbia Circuit upheld a November 2013 FTC rulemaking that deems the transfers of pharmaceutical patent rights to be reportable assets under the Hart-Scott-Rodino Act – even if the sellers retain some manufacturing rights. The FTC’s November 2013 rulemaking modified the HSR Act’s premerger notification rules, clarifying how the Act applies to patent transfer arrangements that are commonly used in the pharmaceutical industry.

Zimmer Holdings to Divest Assets Related to Three Orthopedic Medical Products as a Condition of Acquiring Biomet

To settle FTC charges that its proposed $13.35 billion acquisition of Biomet Inc. is anticompetitive, medical device company Zimmer Holdings, Inc. has agreed to divest assets related to three orthopedic medical products. Zimmer has agreed to divest assets related to its unicondylar knee implants business in the United States to Smith & Nephew and Biomet’s total elbow implants and bone cement businesses in the United States to DJO Global, Inc. According to the FTC’s complaint, Zimmer and Biomet are two of only three substantial competitors in the U.S. markets for unicondylar knee implants and total elbow implants, and two of only four significant competitors in the U.S. market for bone cement. By eliminating competition between the companies, the proposed merger would increase the likelihood that Zimmer would unilaterally exercise market power in these markets, resulting in lower levels of quality and service and higher prices. Further details about the divestitures are set forth in the analysis to aid public comment. FTC staff cooperated with antitrust agencies investigating the proposed acquisition in Europe and Japan, working closely with their staff to analyze the proposed transaction and potential remedies.

Consumer Protection and Privacy

FTC Releases International Consumer Complaint Report

Sentinel cover

The FTC has released its International Consumer Complaints report for 2014, which examines cross-border complaint trends. The report is based on data from the FTC’s Consumer Sentinel Network (CSN), a secure online database of millions of consumer complaints available only to law enforcement. Of the more than 1.5 million fraud complaints reported in the CSN in 2014, more than 98,000 (or 6%) were about cross-border fraud (excluding do not call registry and identity theft complaints). CSN includes complaints from a variety of sources, including, an initiative of the International Consumer Protection and Enforcement Network (ICPEN). Consumers can use to lodge complaints in English, French, Korean, Japanese, Polish, Spanish and Turkish. In 2014, consumer protection law enforcers from 32 nations participated in the network.

Sentinel pie chart

Nearly 49% of the cross-border complaints in CSN were by U.S. consumers complaining about foreign companies (excluding Canada) and nearly 5% involved U.S. consumers complaining about companies located in Canada. Another 18 percent were reported by foreign consumers against companies located in the U.S. or Canada, and 12 percent were by foreign consumers against companies in other foreign locations. Canada was the number one reported foreign company location for calendar year 2014, followed by Nigeria, the United Kingdom, China, Jamaica, India, Mexico, Ghana, the Dominican Republic and the Philippines. Because company locations are based on addresses reported by complaining consumers, who may not know where companies are located, the report likely understates the number of cross-border and international complaints.

The leading complaint category for cross-border complaints filed by U.S. consumers was family/friend impostor scams (10%), followed by shop at-home/catalog sales (8%), prizes/sweepstakes/gifts (7%), foreign money offers (6%) and telemarketing practices (5%). For complaints received solely through (and not through other CSN database sources), the top complaint categories were shop-at-home/catalog sales (18%) followed by computers: equipment/software (8%), credit cards (5%) and internet auction.

Crowdfunding Project Creator Settles FTC Charges of Deception

In its first case involving crowdfunding, the FTC has taken legal action against the deceptive tactics of a project creator who raised money using the platform to produce a board game, but instead used most of the funds on unrelated personal expenses. Crowdfunding involves individuals and businesses funding a project or venture by raising funds from numerous people, often via dedicated online platforms like Kickstarter. According to the FTC complaint, the defendant, who operated under the name, The Forking Path Co., initially raised more than $122,000 from 1,246 backers, but later announced that he was cancelling the project. The FTC’s settlement prohibits the defendant from making any deceptive representations related to any crowdfunding campaigns in the future and requires him to honor any stated refund policy. He is also barred from disclosing or otherwise benefiting from customers’ personal information and failing to dispose of such information properly. This case is part of the FTC’s ongoing work to protect consumers taking advantage of new and emerging financial technologies, also known as FinTech.

FTC Joins Fellow Members of International Network to Address SMS Spam, Robocalls, and Affiliate Marketing

LAP MAWG guide

The London Action Plan (LAP), an international network of anti-spam and do not call governmental enforcers and private sector technologists, met in Dublin last month to coordinate strategies to attack SMS spam, robocalls, and affiliate marketing. With representatives from 14 countries present, the network – led by Secretariat members from the UK’s Information Commissioner’s Office, the Canadian Radio-television and Telecommunications Commission and the FTC – released an updated “best practices” guide to Internet security and risk mitigation for online, mobile, and telephony threats. LAP collaborated on the guide with the Messaging, Malware, Mobile Anti-abuse Working Group. Presented in non-technical language, the best practices guide builds on an earlier version, which served as a foundation for training and capacity building.

In Other News

FTC Staff Questions New York Proposal to Grant Antitrust Immunity to Certain Health Care Collaborations

FTC staff submitted comments urging the New York State Senate and Assembly to carefully consider whether broad antitrust immunity granted in legislative proposals concerning certain health care collaborations would further legitimate public policy goals or, instead, result in higher prices for consumers without any offsetting improvements to health care quality and access. The proposals would authorize two regional health care facilities to collaborate with other public and private health care providers and payers. The proposed legislation would provide them and their collaborating entities with broad immunity from liability under federal and state antitrust laws – even though this purported immunity would cover the kinds of information sharing and joint contract negotiation that are likely to result in reduced competition and higher prices for consumers. “Because procompetitive or competitively benign health care collaborations already are permissible under the antitrust laws, the main effect of this legislation is to immunize conduct that would not generate efficiencies that are greater than consumer harms, and therefore would not pass muster under the antitrust laws,” the staff comments stated. The New York Attorney General’s office also submitted a letter opposing the proposed legislation.

FTC Testifies Before Senate Special Committee on Aging Regarding Efforts to Combat Illegal Robocalls

Robocall global graphic with border and tagline

The FTC testified before the Senate Special Committee on Aging about its efforts to protect consumers from the increasingly global problem of unwanted telemarketing calls and illegal robocalls (prerecorded phone messages). Even though the majority of robocalls are illegal under the FTC’s Telemarketing Sales Rule, they remain a significant problem for consumers. Internet-based technologies make it possible for telemarketers to blast millions of prerecorded messages at low cost across international borders and hide behind spoofed caller ID information. Many scammers from around the world use these calls to harass consumers and attempt to defraud them. The FTC explained how it is using every tool at its disposal to fight illegal robocalls including aggressive law enforcement, technical solutions, robust consumer and business outreach, and international cooperation. The FTC’s testimony explained how the agency promotes technical advancements and collaborates with its counterparts in other countries, including through its leadership in the London Action Plan (see story, above)

FTC ‘Fotonovela’ Warns Latino Community About Notario Scams

Fotonovella graphic

Notarios aren’t attorneys, and they can’t help with the immigration process. That’s the message of the FTC’s newest effort to warn Spanish-speaking consumers about notario scams - a Spanish-language graphic novel known as a “fotonovela.” It describes the warning signs of a notario scam, explains where consumers can find help with the immigration process, and how to report scams to the FTC. This is the latest in the FTC’s fotonovela series, a campaign to promote consumer education and protection in the Latino community. Previous issues focused on debt collectors, government impostors and income scams. As with all FTC outreach materials, foreign counterparts can adapt and use the fotonovela in their own consumer education initiatives.

FTC to Host September Workshop to Examine Advertising for Over-the-Counter Homeopathic Products

Homeopathic workshop graphic

The FTC will host a public workshop in Washington, D.C. on Monday, September 21 to examine advertising for over-the-counter homeopathic products. During the last few decades, the homeopathic drug industry in the United States has grown considerably to become a multibillion dollar market. In that time, the market has shifted from primarily formulations prescribed for an individual user to mass-market formulations widely advertised and sold nationwide in major retail stores. The workshop will evaluate the advertising for such products, bringing together a variety of stakeholders, including medical professionals, industry representatives, consumer advocates, and government regulators. Details about the workshop are available at the FTC website. The FTC will publish a detailed agenda at a later date.